cross-posted from Brock
Posted on February 12, 2012 by Just Me
Forget about the notion that CBT has been with us since the Civil War. Forget about the absurd conclusion of Cook v Tait. The real beginning of our story started 55 years ago on October 16, 1962. This was the beginning of the U.S. government’s campaign of punishment for Americans who dare to live abroad.
Many people have often said that the only way to get the U.S. to understand our situation is to focus not on harms, or fairness, or Constitutionality. Doing that just fuels the clichés and “alternative facts” about all the fatcats abroad, cheating on taxes. Instead, as Roger Conklin tried to do, the Congress, new Treasury Secretary Mnuchin and POTUS should realize that these policies have resulted in a trade deficit for 55 years.
Finally, it merits at least some mention that fifty years ago, before these extra fiscal and financial reporting burdens were put on the shoulders of overseas Americans, and while they were still fully able to compete with the citizens of other countries in the same foreign markets, the United States had enjoyed more than sixty-seven years of unbroken trade surpluses with the rest of the world. During the subsequent decade, after this new toxic tax burden was imposed on those living and working abroad, the U.S. foreign trade position began to weaken, as many had predicted, and a trade deficit appeared for the first time in the 20th Century in 1971. As the tax burden on overseas Americans became increasingly heavy and increasingly incomprehensible, these deficits soon became a permanent fixture of U.S. trade performance, and we are now in our 36th straight deficit year with the cumulative amount of these trade deficits now exceeding $8 trillion.
It is not very obvious so far that the current Administration in Washington , despite the enthralling campaign promises that were made in 2008, has any serious interest in leveling the worldwide playing field for trade. The results for the first eleven months of 2011 already show an impressive deficit for this most recent year of more than $500 billion, which is the worst trade performance of the last three years, and this deficit still grows each and every day at a rate in excess of $1.5 billion. The aggregate trade performance for the first three years of the current administration is now a negative $1.4 trillion! (Update: Year over year, the trade gap for 2011 was up 11.6% to $558 billion.)
This history of the sad and incomprehensibly self-destructive behavior of the United States during the past 50 years, which is unique among all of the major trading nations of the world today, is well worth reading and contemplating.
As has been stated many times before, major world powers don’t always decline due to destruction coming from outside. They sometimes infect themselves with terminal obsessions from within that, alas, seem to then become incurable. This doesn’t have to happen this time to Uncle Sam, but to avoid it something rather urgent needs to be done before it becomes too late.
This is something our oft-criticized fellow expats at ACA understood and have fought for decades. Andy Sundberg is the author of the report which comprises the main portion of this post. Read the entire report and decide if all coming to this situation in the last five years understand the history of this problem better or are entitled to criticize other actions in hindsight. In a recent private email group discussion, a story that came out might offer a useful perspective:
A teacher once told me he was curious why geese always flew in a “V.” So he looked it up and found that the one in the front led until he no longer could and he moved to the back being replaced by the next and so on. In that way they reached their destination.
So no matter whether you come from ACA 50 years ago, or DA, or RO, or AARO, FAWCO, Brock 5 years ago or American Expatriates 3 years ago, we are all trying to get tax reform in order to right this situation once and for all. Each has a part to play in this unfortunate situation. This is much more in keeping with this post’s resolution:
So Let Us Now All Rise Up, Join Together to Throw off These Shackles, and Take Appropriate Action to Prepare for a Much More Positive Future for All of Us, our Heirs and for Our Country.
“ENOUGH IS ENOUGH”
AFTER FIVE DECADES OF ABUSE
IT’S TIME FOR A CHANGE
THIS COMING OCTOBER WE WILL MOURN
THE 50TH ANNIVERSARY
OF THE DEATH OF
A LEVEL PLAYING FIELD
FOR OVERSEAS AMERICANS
AND NOW IT’S TIME TO GET IT BACK
Reproduced by permission of Andy Sundberg, Fellow and Secretary, the Overseas American Academy , Geneva , Switzerland , 16 January 2012.
October 16, 2012, will be the 50th Anniversary of the signing of legislation that brought to an end the right of Americans living and working abroad to compete in world markets under the same terms and conditions as everyone else.
As background text for the solemn jubilee mourning of this sad event, the attached 50 page document has been prepared to help you better understand the myriad arguments that have continued to be put forward to keep justifying not only this strange and uniquely self-destructive fiscal initiative, but also many other changes in U.S. laws and regulations that have been introduced during the last fifty years that also have also contributed to the ever mounting difficulties overseas Americans face all over the world today.
50 page Attachment below:
Enough is Enough – History of how we got to where we are today
The first steps of this sad story were taken only three months after John F. Kennedy became President in January 1961. In a tax reform message addressed to the U.S. Congress, President Kennedy stated on 29 April 1961:
“It is no more justifiable to provide tax exemptions for individuals living in the developed countries than it is to provide tax inducements for capital investment there. Nor should we permit totally unjustified tax benefits to be obtained by those Americans whose choice of residence is dictated primarily by their desire to minimize taxes.
“I, therefore, recommend that the total tax exemption now accorded the earned income of American citizens residing abroad be completely terminated for those residing in economically advanced countries; that this exemption for earned income be limited to $20,000 for those residing in the less developed countries; and that the exemption of $20,000 of earned income now accorded those citizens who stay (but do not reside) abroad for 17 out of 18 months also be completely terminated for those living or traveling in the economically advanced countries.”
Read this again very, very carefully because it will henceforth be set in stone as the subsequent conventional mindset which will be adhered to by both American political parties. There is no virtuous reason why a U.S. citizen would want to live and work abroad. All such decisions are “dictated primarily by their desire to minimize taxes”!
How does he know this? He doesn’t say, nor does he or any of his successors ever feel the need to do so.
This being by definition the default nefarious motivation for living overseas, the U.S. Government obviously should then apply the appropriate punishment and go after overseas Americans, harass them, and keep taxing them no matter where they live and no matter what they might actually be doing. Sadly this negative and retributive attitude will never thereafter change.
The following year, on 16 October, 1962, when a significant portion of President Kennedy’s proposal had quickly been enacted and had now become the new law of the land, he issued the following triumphal statement saying:
“I have today signed H.R. 10650, the Revenue Act of 1962. This is an important bill – one possessing many desirable features which will stimulatethe economy and provide a greater measure of fairness in our tax system.
“It includes several provisions designed to reduce tax avoidance on incomes earned by American companies and individuals at home and abroad.By limiting the opportunities to escape tax liability, it makes the distribution of tax burdens fairer and increases our total tax revenues from those sources.
“In summary, this bill makes a good start on bringing our tax structure up to date and provides a favorable context for the overall tax reform program I intend to propose to the next Congress.”
How President Kennedy and his administration came to the conclusion that adding a unique and complicated extra tax burden to U.S. citizens living abroad was supposed to help the economy of the United States is an extremely enigmatic and complicated story, and one whose legacy endures to this day. It established a new orthodoxy that every subsequent administration and Congress has loyally adhered to.
It is also well worth noting that neither President Kennedy, nor his two immediate successors, Lyndon Johnson and Richard Nixon, showed any real interest in coupling this extra tax burden with even a modicum of new benefits, nor even the right of overseas Americans to be able to vote in U.S. federal elections. It was history turned upside down and destined to be another period of “taxation without representation” that would make a mockery of one of America ’s most fundamental founding principles.
This voting right only eventually became possible fourteen years later after the necessary legislation had finally been enacted during the Ford Administration, and even then it was and would remain a complicated and far from fair process. Given the role that individual States continue to play up to today in setting some of the most important qualification parameters to vote in their States, many U.S. citizens who are born abroad to parents from these States, and who remain abroad, cannot qualify and still today cannot enjoy this right to vote in Federal elections.
Sadly but emblematically, no President has ever felt the need to propose offering overseas Americans the right to have their own direct representation in the U.S. Congress, or even to have a separate voice of their own anywhere else in the U.S. Government.
During the subsequent five decades, as the U.S. tax code ballooned from 14,000 to more than 72,536 pages, many nefarious innovations were introduced. The U.S. dollar became the default currency in which overseas Americans were assumed to be transacting all of their financial activities, and so with moving exchange rates they could be making dollar apparent capital gains on transactions in a foreign currency that were actually real life losses. But this didn’t matter. They would be required to declare all such transactions and pay U.S. taxes on these real loses because in dollars they looked like apparent gains. Where they were supposed to find the funds to pay the taxes on these losses would be a problem that overseas Americans had to solve for themselves. If they failed to declare these transactions, and pay the subsequent U.S. taxes on these losses, they might face not only fines but actually be charged with a felony and be sent to jail.
And then along came the requirement to file annual reports about every foreign bank account (FBARS) that an overseas American possessed, and submit reports about all transactions above a certain minimum amount. Once again, failure to file such reports could lead to heavy penalties for non willful failures and possible jail time for willful failures, and this not for having done anything wrong, but just simply for failure to file such administrative reports! With the new FATCA impositions about to be implemented, this reporting fiasco will explode! It now includes a new form 8938, foreign asset report, and endless new data reporting requirements by Financial Institutions around the world with all their unintended consequences which come from legislative hubris and overreach. You can read more about that here and here.
Finally, it merits at least some mention that fifty years ago, before these extra fiscal and financial reporting burdens were put on the shoulders of overseas Americans, and while they were still fully able to compete with the citizens of other countries in the same foreign markets, the United States had enjoyed more than sixty-seven years of unbroken trade surpluses with the rest of the world. During the subsequent decade, after this new toxic tax burden was imposed on those living and working abroad, the U.S. foreign trade position began to weaken, as many had predicted, and a trade deficit appeared for the first time in the 20th Century in 1971. As the tax burden on overseas Americans became increasingly heavy and increasingly incomprehensible, these deficits soon became a permanent fixture of U.S. trade performance, and we are now in our 36th straight deficit year with the cumulative amount of these trade deficits now exceeding $8 trillion.
It is not very obvious so far that the current Administration in Washington , despite the enthralling campaign promises that were made in 2008, has any serious interest in leveling the worldwide playing field for trade. The results for the first eleven months of 2011 already show an impressive deficit for this most recent year of more than $500 billion, which is the worst trade performance of the last three years, and this deficit still grows each and every day at a rate in excess of $1.5 billion. The aggregate trade performance for the first three years of the current administration is now a negative $1.4 trillion! (Update: Year over year, the trade gap for 2011 was up 11.6% to $558 billion.)
This history of the sad and incomprehensibly self-destructive behavior of the United States during the past 50 years, which is unique among all of the major trading nations of the world today, is well worth reading and contemplating.
As has been stated many times before, major world powers don’t always decline due to destruction coming from outside. They sometimes infect themselves with terminal obsessions from within that, alas, seem to then become incurable. This doesn’t have to happen this time to Uncle Sam, but to avoid it something rather urgent needs to be done before it becomes too late.
So Let Us Now All Rise Up, Join Together to Throw off These Shackles, and Take Appropriate Action to Prepare for a Much More Positive Future for All of Us, our Heirs and for Our Country.
After five decades of living passively with increasing insults and incomprehensible harassment, now is the time for overseas Americans everywhere to join together to resist our government’s self-destructive behavior. Let’s get appropriately organized to work creatively, diligently and effectively to reclaim our rights to be respected and to be able once again to compete all over the world free of the self-defeating impositions that have been so gratuitously imposed upon us by our own U.S. Government. We need to bring back the respect and fundamental rights we once all enjoyed, and that we fully deserve to all enjoy once again. Let’s go for it! As our nation’s history has clearly shown, working together the right way really works!!
*****
If you have the time and the fortitude to read all the way through the historical compendium that is attached above, I’d be most grateful for your comments, your contributions of additions and corrections, and especially for your suggestions as to what we could and should be doing individually and collectively now.
Maybe, before this current sad jubilee year ends, we can all finally celebrate a long awaited and long overdue victory, consign this deplorable story to the archives of “never again”, and get ourselves back into the competitively equal situation we lost in 1962. We’ll never know until we actually try, because, yes, even today, miracles can indeed still happen!!